This year's autumn fiscal update from Jim Flaherty, the Minister of Finance, is similar to his ill-fated November, 2008, update in that it contains little that is new, but the effect is quite the opposite.
Then, the apparent lack of initiative was alarming in the face of the international financial crisis. Now, it is reassuring that the federal government's financial record and projections are reasonably close to what the 2009 and 2010 budgets planned for, and the prospects offered of a return to balance have become considerably more persuasive. The 2009 budget cautiously projected a small deficit in 2014-2015, rather than predicting a definite time when the deficit would disappear, as the update now does for 2015-2016.
There are other elements of reassurance, too. There is conservatism of a kind in the projections of expenses. The federal-provincial agreements on health-care, social and equalization transfers will expire in 2013-2014, if not renewed or revised, but the update's program-expenses outlook has health and social transfers merrily continuing to rise to $47-billion in 2015-2016, at the current rate of increase, comfortably ahead of actual and expected inflation.
"From 2014-2015 onward," says the update, "these growth rates have not yet been legislated and therefore are subject to change."
Thus, the federal government is neither agreeing in advance to the status quo nor threatening an end to the relentlessly increasing proportion of health-care spending in the budgets of the governments of Canada. There may be a tactical factor here, a warding off of the opposition's dire warnings about the Conservatives' supposed intentions, but if so, it was quite subtle. This point did not figure in Mr. Flaherty's speech to the Chinese Business Association of Mississauga, which accompanied the release of the update.
There is caution also in the decision to depart a little from the customary practice of forecasting nominal GDP according to the average of private-sector forecasts; instead, that average will be adjusted downward.
Both the speech and the update emphasized Canada's comparative prosperity through the recession and the recovery, but did not mention the country's worrying lag in productivity and innovation. This was just an update, not a budget; the Conservatives are staying the course.
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